EFTA01473355.pdf

Deutsche Bank Markets Research Rating Buy North America United States Reuters Health Care Biotechnology RTRX.OQ Bloomberg RTRX US Exchange Ticker NMS RTRX Company Retrophin Agrees to sell PRV for $245M, new TP of $52 Retrophin agrees to sell its PRV to SNY for $245M, new TP of $52 This morning RTRX announced that it plans to sell the rare pediatric priority review voucher acquired with the approval of Cholbam to Sanofi for $245M. The company will receive $150M when the deal closes (no timing was provided by the company; we assume at some point during 3Q15), and two additional payments of $47.5M in 2016 and 2017. The company has previously disclosed that it plans to use the proceeds for its late-stage pipeline and/- or for business development. We are raising our TP to $52 to account for the transaction. Reiterate BUY. Prior vouchers sold for $67.5M and $125M. This is the highest price paid for a voucher to our knowledge and demonstrates their scarcity. We note that UTHR is the only other company to have one of these vouchers in its possession. The company sold the voucher for $145M over our projected sale price of $100M. A sale of $100M was worth approx $1.4/sh to our DCF. The additional $145M is approx $2/sh to our DCF. Reiterate BUY, new TP of $52. Valuation and risks: We value RTRX using a probability-adjusted DCF analysis with a 10% discount rate. We extend our estimates to 2029 and use a 2% terminal growth rate. Risks: 1) Base business sales risk, 2) Sparsentan / other pipeline products fail, 3) Regulatory risk, and 4) Reimbursement risk. Evan Seigerman Research Associate Research Associate Key changes EFTA01473355 Price target EPS (USD) Date 27 May 2015 Breaking News Price at 26 May 2015 (USD) Price target 52-week range Robyn Karnauskas Research Analyst (+1) 212 250-7591 52.00 26.98 - 8.09 50.00 to 52.00 t Source: Deutsche Bank Price/price relative 12 16 20 24 28 0 4 8 12/12 6/13 12/13 6/14 Retrophin S&P 500 INDEX (Rebased) Performance (%) Absolute S&P 500 INDEX Source: Deutsche Bank lm 3m 12m 8.6 -0.6 80.3 -0.3 95.7 10.7 12/14 4.0% 0.96 to 1.65 t 71.5% Deutsche Bank Securities Inc. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should EFTA01473356 be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 124/04/2015. EFTA01473357 27 May 2015 Biotechnology Retrophin Model updated:27 May 2015 Running the numbers North America United States Biotechnology Retrophin Reuters: RTRX.OQ Buy Price (26 May 15) Target Price 52 Week range Market Cap (m) Company Profile Retrophin is a biopharmaceutical company focused on discovering, developing and marketing innovative therapies for debilitating and often life-threatening diseases. Fiscal year end 31-Dec Financial Summary DB EPS (USD) Reported EPS (USD) DPS (USD) BVPS (USD) Valuation Metrics Price/Sales (x) Bloomberg: RTRX US USD 26.87 USD 52.00 USD 8.09 - 26.98 USDm 949 EURm 871 P/E (DB) (x) P/E (Reported) (x) P/BV (x) FCF yield (%) Dividend yield (%) EV/Sales EV/EBITDA EV/EBIT Income Statement (USDm) Sales EBITDA EBIT Pre-tax profit Net income Cash Flow (USDm) Cash flow from operations Net Capex EFTA01473358 Free cash flow Equity raised/(bought back) Dividends paid Price Performance 12 16 20 24 28 0 4 8 Dec 12 Jun 13 Retrophin Margin Trends 84 86 87 89 90 92 93 14 15E EBITDA Margin Growth & Profitability 100 150 200 50 0 14 Solvency -140 -120 -100 -80 -60 -40 -20 0 14 15E Net debt/equity (LHS) Rob n Karnauskas age 16E 17E Net interest cover (RHS) EFTA01473359 Deutsche Bank Securities Inc. 15E 16E Sales growth (LHS) 17E ROE (RHS) 10 20 30 40 50 0 16E EBIT Margin 17E Dec 13 Jun 14 Dec 14 S&P 500 INDEX (Rebased) Net inc/(dec) in borrowings Other investing/financing cash flows Net cash flow Change in working capital Balance Sheet (USDm) Cash and cash equivalents Property, plant & equipment Goodwill Other assets Total assets Debt Other liabilities Total liabilities Total shareholders' equity Net debt Key Company Metrics Sales growth (%) DB EPS growth (%) Payout ratio (%) EBITDA Margin (%) EBIT Margin (%) ROE (%) Net debt/equity (%) Net interest cover (x) DuPont Analysis EBIT margin (%) x Asset turnover (x) x Financial cost ratio (x) x Tax and other effects (x) = ROA (post tax) (%) x Financial leverage (x) = ROE (%) EFTA01473360 annual growth (%) x NTA/share (avg) (x) = Reported EPS annual growth (%) Source: Company data, Deutsche Bank estimates 2014 -2.51 0.84 0.00 -1.49 11.2 nm 15.0 nm 29.3 0.0 10.2 11.0 11.0 28 26 26 29 31 96 -4 92 38 0 38 -33 135 60 18 1 0 117 135 0 173 173 -37 -18 nm na 0.0 92.8 92.8 nm nm nm EFTA01473361 92.8 0.2 1.0 1.2 22.9 -3.6 -83.2 na -1.0 0.84 na 2015E 1.65 0.63 0.00 6.07 11.6 16.3 42.6 4.4 4.9 0.0 8.3 9.4 9.4 81 72 72 72 30 50 -4 46 150 0 0 0 196 -4 262 5 0 109 375 0 161 161 214 -262 189.0 na EFTA01473362 0.0 88.0 88.0 33.8 -122.2 nm 88.0 0.3 1.0 0.4 11.7 2.9 33.8 na 1.9 0.63 -24.6 2016E 1.00 2.13 0.00 7.88 8.0 26.9 12.6 3.4 13.7 0.0 5.0 5.8 5.8 119 103 103 103 103 139 -4 135 0 0 0 0 135 10 342 8 0 109 459 0 EFTA01473363 171 171 288 -342 46.3 -39.4 0.0 86.7 86.7 41.2 -118.8 nm 86.7 0.3 1.0 1.0 24.8 1.7 41.2 21.9 5.2 2.13 237.1 2017E 1.08 2.19 0.00 9.86 5.9 24.8 12.3 2.7 13.2 0.0 3.3 3.8 3.8 160 136 136 136 108 137 -4 133 0 0 0 0 133 2 EFTA01473364 420 11 0 109 541 0 173 173 368 -420 33.8 8.2 0.0 85.5 85.5 32.9 -114.3 nm 85.5 0.3 1.0 0.8 21.6 1.5 32.9 -20.1 6.7 2.19 2.7 EFTA01473365 27 May 2015 Biotechnology Retrophin RTRX DCF Figure 1: RTRX DCF DB BIOTECH: RETROPHIN DCF Robyn Karnauskas PhD 212-250-7591, DB BIOTECH: RTRX - DISCOUNTED CASH FLOW 2015E EBT less : Taxes tax rate add: D&A less : Net working capital less : Capital Expeditures Operating Free Cash Flow Growth Discount Period Discount Factor Present value of Cash Flows Terminal growth rate = Discount Rate NPV Cash Flows ($M) NPV TV ($M) NPV Total ($M) Net Cash/(Debt) Net cash/share $/ Share of terminal value TV as % of total value NPV Cash Flows + TV Shares outstanding 2.0% 10.0% $1,612 $751 $2,364 $85 $2 $16 31% $52 47 $127 ($44) 35.0% $0 ($3) ($3) $76 0 EFTA01473366 1.00 $76 DCF = $52 2016E $49 $0 2017E $82 ($29) 2018E $43 ($15) 2019E $174 ($61) $0 $10 ($4) $55 -28% 0.75 0.93 $51 $1 $2 ($4) $52 -6% 1.75 0.85 544 51 511 ($4) 536 -30% 2.75 0.77 $28 $1 $8 ($4) $119 228% 3.75 0.70 $83 2020E $219 ($77) $2 EFTA01473367 $1 ($4) $141 18% 4.75 0.64 $90 2021E $305 ($107) 2022E $413 ($144) 2023E $529 ($185) 2024E $660 ($231) 2025E $865 ($303) 2026E $546 ($191) 2027E $564 ($197) 2028E $582 ($204) 2029E $358 ($125) 0.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% $2 $17 ($4) $214 52% 5.75 0.58 $123 $2 $13 ($4) $279 31% 6.75 0.53 EFTA01473368 $147 $2 $12 ($4) $354 27% 7.75 0.48 $169 $2 $11 ($4) $439 24% 8.75 0.43 5190 53 ($10) ($4) 5550 26% 9.75 0.39 5217 53 ($67) ($4) $287 -48% 10.75 0.36 $103 $3 $0 ($4) $366 28% 11.75 0.33 $119 $3 $0 ($4) $378 3% 12.75 0.30 $112 $3 ($13) EFTA01473369 ($4) $218 -42% 13.75 0.27 $59 $2,785 13.75 0.27 $751 TV Source: Deutsche Bank Deutsche Bank Securities Inc. Page 3 EFTA01473370 27 May 2015 Biotechnology Retrophin RTRX P&L Figure 2: P&L 2014A Base Business Revenues Thiola- WW Sales (Unadjusted) Growth Probability of LT sales Thiola- WW Sales (adjusted) Patients on Drug (end of period) Growth Chenodal Growth Cholbam Growth Total Base Business Revenues Growth Pipeline Sparsentan for FSGS- Unadjusted Probability of Success Sparsentan Adjusted Sales Growth RE-024 for PKAN- Unadjusted Probability of Success RE-024 for PKAN- Adjusted Sales Growth Total Pipeline Adjusted Revenues Total Product Revenues to Retrophin (pipeline adjusted) Operating Expenses- Base Business Cost of Goods Base COGS % of Sales Thiola Royalities % of Sales Chenodal Royalities Royalty Rate Cholbam Royalities Royalty Rate Total COGS- Base Business SG&A- Base Business Growth SGA- Adjusted for Thiola LT Probability R&D-Base Business Growth R&D- Adjusted to Thiola LT Probability Milestone Payments to Asklepsion (Cholbam) Cumulative Milestone Total Base Business Operating Expenses Operating Expenses- Pipeline EFTA01473371 Cost of Goods Base COGS % of Sales Sparsentan Royalities to Ligand Royalty Rate Sparsentan Related Milestone Payments Cumulative Milestone Total COGS- Pipeline Sparsentan R&D- Adjusted Growth RE-024 R&D- Adjusted Growth Sparsentan SG&A- Adjusted Growth RE-024 SG&A- Adjusted Growth Total Pipeline Operating Expenses Total operating expenses % Operating margins Interest income/ (expsense), net Realized gain on sale of mkt securities FX gain/ loss Other income (expenses), net Earnings before Taxes Tax (tax credit/ benefit) Tax rate Non-GAAP Net Income FD EPS- Non-GAAP Basic sharecount FD sharecount Source: Deutsche Bank $18 $75 -33% -$7 $2 $0 -$14 -$65 -$2 0% -$63 -$2.51 25 37 $6 $18 -9% -$4 $0.11 $0 EFTA01473372 -$1.4 -$6.60 50 0% -$7 -$0.19 35 47 56 521 -7% -$1 50 50 -$27 -$30 50 0% -$30 -$0.84 35 47 56 522 -1% -$1 $0 $0 $150 $149 $52 35% $97 $2.03 35 47 $6 $23 3% -$1 $0 $0 $0 $0 $0 35% $0 -$0.01 36 48 525 EFTA01473373 $78 4% -$5 $0 $0 $122 $120 $42 35% $78 $1.65 35 47 $43 $113 5% -$5 $O SO $48 $49 $0 8% $49 $1.00 37 49 S37 S120 25% -$5 $O $O $48 $82 $29 35% $53 $1.08 37 49 $7 $11 $4 114% $2 -27% $4 3% $2 1% EFTA01473374 $4 3% $2 1% $4 3% $2 1% $8 $17 $0 $33 100% $10 -26% 20% $0 $0 $57 $23 $1 2% $2 48% $4 15% $0 0% $1 $33 $0.3 2% $2 21% $1 10% $0 7% $3 $7 $7 $2 -74% $2 $0 $12 $0.4 2% $4 35% $1 10% EFTA01473375 $0 7% $5 $8 5% $8 $2 1% $2 $0 $15 $0.4 2% $4 35% $1 10% $0 7% $6 $8 5% $8 $2 1% $2 $0 $16 $0.5 2% $5 35% $1 10% $0 7% $6 $8 5% $8 $2 1% $2 $0 $17 $2 2% $12 $9 20% $3 EFTA01473376 10% $0 7% $14 $31 $2 2% $14 $14 20% $3 10% $2 8% $21 $36 -5% 15% $31 $8 -65% $8 $0 $54 $36 $8 3% $8 $5 $70 $3 2% $20 $21 20% $3 10% $2 8% $29 $39 10% $39 $9 3% $9 $6 $11 $83 $4 2% $28 EFTA01473377 $30 20% $3 10% $2 8% $39 $43 10% $43 $9 3% $9 $7 $18 $98 $5 2% $40 $39 20% $4 10% $2 8% $51 $48 10% $48 $9 3% $9 $8 $26 $116 $4 2% $53 $25 10% $4 10% $3 8% $35 $52 10% $26 $9 3% $5 EFTA01473378 $11 $37 $77 $4 2% $68 $28 10% $4 10% $3 8% $40 $55 5% $28 $10 3% $5 $0 $37 $72 $5 2% $84 $31 10% $5 10% $3 8% $43 $58 5% $29 $10 3% $5 $0 $37 $77 $5 2% $99 $33 10% $5 10% $3 8% $46 EFTA01473379 $61 5% $30 $10 3% $5 $0 $37 $82 $5 2% $56 $35 10% $5 10% $3 8% $49 $64 5% $32 $11 3% $5 $0 $37 $86 $6 2% $0 $0 0% $6 10% $4 8% $15 $67 5% $34 $11 3% $5 $0 $37 $54 $6 2% $0 $0 EFTA01473380 0% $6 10% $4 8% $16 $68 2% $34 $11 3% $6 $0 $37 $56 $6 2% $0 $0 0% $7 10% $4 8% $17 $70 2% $35 $12 3% $6 $0 $37 $58 $7 2% $0 $0 0% $7 10% $4 8% $18 $71 2% $36 $12 3% $6 $0 EFTA01473381 $37 $59 $7 2% $0 $0 0% $8 10% $4 8% $19 $73 2% $36 $12 3% $6 $0 $37 $62 $28 $17 $19 $22 $24 $0 $81 $0 $119 $0 $160 $0 $207 $24 $0 100% $10 680 $7 $4 1015E $10 2015E $11 16% 100% $11 773 14% $7 EFTA01473382 1% $1 3Q15E $12 10% 100% $12 846 10% $7 1% $2 4015E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E $13 100% $13 919 9% $7 1% $3 $29 21% $6 $46 8% 1007% 100% $46 919 $72 54% 100% $72 900 $28 -3% $19 224% $48 $28 $17 $19 $22 $24 $81 189% $119 46% $106 48% EFTA01473383 100% S106 1350 -2% 110% $31 8% $23 18% $54 $160 34% $0 75% $0 $148 39% 100% $148 1887 0% $33 8% $26 14% $59 $207 30% $0 75% $0 $197 33% 100% $197 2497 32% $36 8% $30 14% $66 $263 27% $133 75% $100 $35 25% $9 $246 24% EFTA01473384 50% $123 3184 28% $39 8% $34 15% $73 $196 $282 15% 50% $141 3680 16% $42 8% $37 7% $78 $219 -26% 12% $277 75% $208 108% $72 25% $18 105% $109 $372 $226 $421 $431 75% $324 56% $113 25% $28 56% $352 $571 $309 10% 50% $155 3975 8% EFTA01473385 $45 8% $39 7% $84 $239 9% $598 75% $448 39% $157 25% $39 39% $488 $726 $331 7% 50% $166 4167 5% $49 8% $41 4% $89 $255 7% $778 75% $583 30% $204 25% $51 30% $634 $352 6% 50% S176 4308 3% $53 8% $42 4% $95 $271 EFTA01473386 6% $371 5% 50% $185 4423 3% $57 8% $44 4% $101 $286 6% $972 $1,181 75% $729 25% $255 25% $64 25% $792 $389 5% 50% $195 4511 2% $62 8% $46 4% $108 $302 6% 75% $886 22% $265 25% $66 4% $952 $889 $1,063 51,239 $402 75% 5301 -66% 5276 25% EFTA01473387 $69 4% $370 $672 $409 5% 50% $205 4602 2% $67 8% $48 4% $319 6% $402 75% $301 0% $287 25% $72 4% $373 $692 $430 5% 50% $215 4694 2% $72 8% $50 4% $337 6% $402 75% $301 $298 25% $75 4% $376 $713 $451 5% 50% $226 EFTA01473388 4788 2% $78 8% $52 5% $356 6% $0 75% $0 0% -100% $310 25% $78 4% $78 $434 $0 2% $0 2% $0 2% $0 17% $0 $0 $0 $34 3% $3 3% $0 $0 2% $0 17% $0 $0 $0 $35 3% $3 3% $19 $2 2% $17 17% $5 EFTA01473389 $5 $24 $13 $3 3% $33 75% $4 $5 20% $60 $159 23% -$5 $0 $0 $0 $43 515 35% 528 50.57 37 49 577 5193 48% -$5 $0 $0 $0 $174 $61 35% $113 $2.29 37 49 $5 2% $35 17% $10 $15 $50 $7 $1 $57 75% 55 200 EFTA01473390 $121 $198 53% -$5 $0 $0 $0 $219 $77 35% $142 $2.89 37 49 $7 2% $55 17% $15 $30 $77 $5 $1 $100 75% $6 3% $189 $261 54% -$5 $0 $0 $0 $305 $107 35% $198 $4.02 37 49 $10 2% $76 17% $20 $50 $106 $4 $1 $116 EFTA01473391 15% $6 3% $232 $309 57% -$5 $0 $0 $0 $413 $144 35% $268 55.44 37 49 513 2% $99 17% $25 $75 $137 $3 $1 -50% -25% -25% -25% $127 10% $6 3% $273 $355 60% -$5 $0 $0 $0 $529 $185 35% $344 $6.98 37 49 $16 2% $124 17% $31 $106 EFTA01473392 $170 $1 $1 3% $133 5% $6 3% $312 $398 63% -$5 $0 $0 $0 $660 $231 35% $429 $19 2% $151 17% $0 $106 $170 $1 $1 3% $137 $7 2% $51 17% $0 $106 $59 $0 -63% -50% -25% -25% -25% -50% -50% -100% $1 3% $0 3% -100% $6 3% $315 $369 70% -$5 $0 $0 EFTA01473393 $0 $865 $303 35% $562 $8.71 $11.41 37 49 37 49 $6 3% $66 $121 82% -$5 $0 $0 $0 $546 $191 35% 5355 57.20 37 49 57 3% 566 $123 82% -$5 $0 $0 $0 $564 $197 35% $366 $7.43 37 49 $7 3% $66 $126 82% -$5 $0 $0 $0 EFTA01473394 $582 $204 35% $379 $7.68 37 49 $7 3% $9 $71 84% -$5 $0 $0 $0 $358 $125 35% $233 $4.72 37 49 $1 3% $0 $1 3% $0 $1 3% $0 $7 2% $51 17% $0 $106 $59 $0 $8 2% $51 17% $0 $106 $59 $0 $2 2% $0 EFTA01473395 17% $0 $106 $2 $0 Page 4 Deutsche Bank Securities Inc. EFTA01473396 27 May 2015 Biotechnology Retrophin Appendix 1 Important Disclosures Additional information available upon request Disclosure checklist Company Retrophin Ticker RTRX.OQ Recent price* 26.87 (USD) 26 May 15 Disclosure 1,6,7,8,9 *Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr. Important Disclosures Required by U.S. Regulators Disclosures marked with an asterisk may also be required by at least one jurisdiction in addition to the United States. See Important Disclosures Required by Non-US Regulators and Explanatory Notes. 1. Within the past year, Deutsche Bank and/or its affiliate(s) has managed or co-managed a public or private offering for this company, for which it received fees. 6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by US law. 7. Deutsche Bank and/or its affiliate(s) has received compensation from this company for the provision of investment banking or financial advisory services within the past year. 8. Deutsche Bank and/or its affiliate(s) expects to receive, or intends to seek, compensation for investment banking services from this company in the next three months. Important Disclosures Required by Non-U.S. Regulators Please also refer to disclosures in the Important Disclosures Required by US Regulators and the Explanatory Notes. 1. Within the past year, Deutsche Bank and/or its affiliate(s) has managed or co-managed a public or private offering for this company, for which it received fees. 6. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by US law. 7. Deutsche Bank and/or its affiliate(s) has received compensation from this EFTA01473397 company for the provision of investment banking or financial advisory services within the past year. 9. Deutsche Bank and/or its affiliate(s) owns one percent or more of any class of common equity securities of this company calculated under computational methods required by India law. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/Disclosure.eqsr?ricCode=RTRX.Op Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Robyn Karnauskas Deutsche Bank Securities Inc. Page 5 EFTA01473398 27 May 2015 Biotechnology Retrophin Historical recommendations and target price: Retrophin (RTRX.OQ) (as of 5/26/2015) 30.00 25.00 20.00 15.00 10.00 5.00 0.00 Dec 12 Mar 13 1. 04/28/2015: Equity rating key Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock. Sell: Based on a current 12-month view of total shareholder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Notes: 1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were: Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12month period Sell: Expected total return (including dividends) of -10% or worse over a 12-month period Jun 13 Sep 13 Dec 13 Mar 14 Date Upgrade to Buy, Target Price Change USD50.00 Equity rating dispersion and banking relationships 100 200 300 400 500 600 EFTA01473399 0 Buy Hold Sell Companies Covered Cos. w/ Banking Relationship North American Universe 50 % 58 % 44 % 2 %37 % 48 % Jun 14 Sep 14 Dec 14 Mar 15 Buy Hold Sell Not Rated Suspended Rating *New Recommendation Structure as of September 9,2002 Previous Recommendations 1 Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating Current Recommendations Page 6 Deutsche Bank Securities Inc. Security Price EFTA01473400 27 May 2015 Biotechnology Retrophin Regulatory Disclosures 1.Important Additional Conflict Disclosures Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. 2.Short-Term Trade Ideas Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the SOLAR link at http://gm.db.com. Deutsche Bank Securities Inc. Page 7 EFTA01473401 27 May 2015 Biotechnology Retrophin Additional Information The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively "Deutsche Bank"). Though the information herein is believed to be reliable and has been obtained from public sources believed to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness. Deutsche Bank may consider this report in deciding to trade as principal. It may also engage in transactions, for its own account or with customers, in a manner inconsistent with the views taken in this research report. Others within Deutsche Bank, including strategists, sales staff and other analysts, may take views that are inconsistent with those taken in this research report. Deutsche Bank issues a variety of research products, including fundamental analysis, equity-linked analysis, quantitative analysis and trade ideas. Recommendations contained in one type of communication may differ from recommendations contained in others, whether as a result of differing time horizons, methodologies or otherwise. Deutsche Bank and/or its affiliates may also be holding debt securities of the issuers it writes on. Analysts are paid in part based on the profitability of Deutsche Bank AG and its affiliates, which includes investment banking revenues. Opinions, estimates and projections constitute the current judgment of the author as of the date of this report. They do not necessarily reflect the opinions of Deutsche Bank and are subject to change without notice. Deutsche Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof if any opinion, forecast or estimate contained herein changes or subsequently becomes inaccurate. This report is provided for informational purposes only. It is not an offer or a solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy. Target prices are inherently imprecise and a product of the analyst's judgment. The financial instruments discussed in this report may not be suitable for all investors and investors must make their own informed investment decisions. Prices and availability of financial instruments are subject to change without notice and investment transactions can lead to losses as a result of price fluctuations and other factors. If a financial instrument is denominated in a currency other than an investor's currency, a change in exchange rates may adversely affect the investment. Past performance is not necessarily indicative of future results. Unless otherwise indicated, prices are current as of the end of the previous trading session, and are sourced from local exchanges via Reuters, Bloomberg and EFTA01473402 other vendors. Data is sourced from Deutsche Bank, subject companies, and in some cases, other parties. Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promise to pay fixed or variable interest rates. For an investor who is long fixed rate instruments (thus receiving these cash flows), increases in interest rates naturally lift the discount factors applied to the expected cash flows and thus cause a loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, the higher will be the loss. Upside surprises in inflation, fiscal funding needs, and FX depreciation rates are among the most common adverse macroeconomic shocks to receivers. But counterparty exposure, issuer creditworthiness, client segmentation, regulation (including changes in assets holding limits for different types of investors), changes in tax policies, currency convertibility (which may constrain currency conversion, repatriation of profits and/or the liquidation of positions), and settlement issues related to local clearing houses are also important risk factors to be considered. The sensitivity of fixed income instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to inflation, to FX depreciation, or to specified interest rates — these are common in emerging markets. It is important to note that the index fixings may -- by construction -- lag or mis-measure the actual move in the underlying variables they are intended to track. The choice of the proper fixing (or metric) is particularly important in swaps markets, where floating coupon rates (i.e., coupons indexed to a typically short-dated interest rate reference index) are exchanged for fixed coupons. It is also important to acknowledge that funding in a currency that differs from the currency in which coupons are denominated carries FX risk. Naturally, options on swaps (swaptions) also bear the risks typical to options in addition to the risks related to rates movements. Derivative transactions involve numerous risks including, among others, market, counterparty default and illiquidity risk. The appropriateness or otherwise of these products for use by investors is dependent on the investors' own circumstances including their tax position, their regulatory environment and the nature of their other assets and liabilities, and as such, investors should take expert legal and financial advice before entering into any transaction similar Page 8 Deutsche Bank Securities Inc. EFTA01473403 27 May 2015 Biotechnology Retrophin to or inspired by the contents of this publication. The risk of loss in futures trading and options, foreign or domestic, can be substantial. As a result of the high degree of leverage obtainable in futures and options trading, losses may be incurred that are greater than the amount of funds initially deposited. Trading in options involves risk and is not suitable for all investors. Prior to buying or selling an option investors must review the "Characteristics and Risks of Standardized Options", at http://www.optionsclearing.com/about/publications/character- risks.jsp. If you are unable to access the website please contact your Deutsche Bank representative for a copy of this important document. Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs, whose values are affected by the currency of an underlying security, effectively assume currency risk. Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the investor's home jurisdiction. United States: Approved and/or distributed by Deutsche Bank Securities Incorporated, a member of FINRA, NFA and SIPC. Non-U.S. analysts may not be associated persons of Deutsche Bank Securities Incorporated and therefore may not be subject to FINRA regulations concerning communications with subject company, public appearances and securities held by the analysts. Germany: Approved and/or distributed by Deutsche Bank AG, a joint stock corporation with limited liability incorporated in the Federal Republic of Germany with its principal office in Frankfurt am Main. Deutsche Bank AG is authorized under German Banking Law (competent authority: European Central Bank) and is subject to supervision by the European Central Bank and by BaFin, Germany's Federal Financial Supervisory Authority. 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Commissions and risks involved in stock transactions - for stock transactions, we charge stock commissions and consumption tax by multiplying the transaction amount by the commission rate agreed with each customer. Stock transactions can lead to losses as a result of share price fluctuations and other factors. Transactions in foreign stocks can lead to additional losses stemming from foreign exchange fluctuations. We may also charge commissions and fees for certain categories of investment advice, products and services. Recommended investment strategies, products and services carry the risk of losses to principal and other losses as a result of changes in market and/or economic trends, and/or fluctuations in market value. Before deciding on the purchase of financial products Deutsche Bank Securities Inc. Page 9 EFTA01473405 EFTA01473406 27 May 2015 Biotechnology Retrophin and/or services, customers should carefully read the relevant disclosures, prospectuses and other documentation. "Moody's", "Standard & Poor's", and "Fitch" mentioned in this report are not registered credit rating agencies in Japan unless Japan or "Nippon" is specifically designated in the name of the entity. Reports on Japanese listed companies not written by analysts of DSI are written by Deutsche Bank Group's analysts with the coverage companies specified by DSI. Some of the foreign securities stated on this report are not disclosed according to the Financial Instruments and Exchange Law of Japan. Malaysia: Deutsche Bank AG and/or its affiliate(s) may maintain positions in the securities referred to herein and may from time to time offer those securities for purchase or may have an interest to purchase such securities. Deutsche Bank may engage in transactions in a manner inconsistent with the views discussed herein. Qatar: Deutsche Bank AG in the Qatar Financial Centre (registered no. 00032) is regulated by the Qatar Financial Centre Regulatory Authority. Deutsche Bank AG - QFC Branch may only undertake the financial services activities that fall within the scope of its existing QFCRA license. Principal place of business in the QFC: Qatar Financial Centre, Tower, West Bay, Level 5, PO Box 14928, Doha, Qatar. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Business Customers, as defined by the Qatar Financial Centre Regulatory Authority. Russia: This information, interpretation and opinions submitted herein are not in the context of, and do not constitute, any appraisal or evaluation activity requiring a license in the Russian Federation. Kingdom of Saudi Arabia: Deutsche Securities Saudi Arabia LLC Company, (registered no. 07073-37) is regulated by the Capital Market Authority. Deutsche Securities Saudi Arabia may only undertake the financial services activities that fall within the scope of its existing CMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al Olaya District, P.O. Box 301809, Faisaliah Tower United Arab Emirates: Deutsche Bank AG in the Dubai International Financial Centre (registered no. 00045) is regulated by the Dubai Financial Services Authority. Deutsche Bank AG - DIFC Branch may only undertake the financial services activities that fall within the scope of its existing DFSA license. EFTA01473407 Principal place of business in the DIFC: Dubai International Financial Centre, The Gate Village, Building 5, PO Box 504902, Dubai, U.A.E. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to Professional Clients, as defined by the Dubai Financial Services Authority. Australia: Retail clients should obtain a copy of a Product Disclosure Statement (PDS) relating to any financial product referred to in this report and consider the PDS before making any decision about whether to acquire the product. 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